United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
ST. EVE, DISTRICT COURT JUDGE
matter before the Court concerns the claims of Patrick
Cavanaugh, not individually, but in his capacity as receiver
of the Overall Receivership Estate (the "Overall
Receiver"), against Defendants Standley Plastics, Inc.
("Standley Plastics") and Steven Standley
"Defendants"). Defendants have moved for "an
order determining the substantive law that applies to Counts
One and Two of the [Overall] Receiver's First Amended
Complaint." (R. 1174). Specifically, Defendants contend
that Florida law governs Counts One and Two, while the
Overall Receiver maintains that Missouri law governs Count
For the following reasons, the Court denies in part
Defendants' motion, concluding that Missouri law governs
Count One and, based on the agreement of the parties, Florida
law governs Count Two.
fall of 2013, Standley sought an investment of $13, 000, 000
for his company now known as Standley Plastics. (R. 1243,
Defs.' Answer & Affirmative Defense, at ¶ 8.)
Standley engaged a man named Steven Bombola to find investors
for a fee. (Id.) Bombola came into contact with
Timothy Fisher ("Fisher"), who worked for First
Farmers Financial, LLC ("First Farmers"),
and, as a result of Bombola's conversations with Fisher,
First Farmers made two wire transfers from a Florida bank
account to a Standley Plastics account in a Missouri bank
totaling $625, 000. (Id. at 110; Bombola Dep., R.
1250-2, at 40, 57; R. 1250, Pl.'sResp. Opp., at 5; R.
1260, Defs.' Reply, at 3.) The parties did not execute
any written documents in connection with these two transfers.
(R. 1243 at ¶ 10.) Standley Plastics used the money
immediately to buy new equipment for its plant in Lamar,
First Farmers and Standley Plastics formally agreed to a $2,
000, 000 loan (which would include the $625, 000 First
Farmers had already transferred to Standley Plastics),
represented by various related documents, including a
promissory note, a security agreement, and a guaranty of
payment. (Id. at¶¶ 13-14; R. 1145-1,
Compl., Ex. A-B; R. 1058-1, Standley Aff) First Farmers sent
the documents to Bombola who forwarded them to Standley to be
executed. (R 1243 at ¶ 13; Standley Dep., R. 1250-1, at
91-93, 99; R. 1250-2 at 86-87, 110-11; R. 1250 at 4.)
Standley then executed the documents on December 27, 2013,
sent them back to Bombola, who in turn sent them to Fisher.
(R. 1243 at ¶ 13-14; R. 1250-1 at 91-93, 99; R. 1250-2
at 86-87; R. 1250 at 4.)
the time in which Fisher, Bombola, and Standley were
communicating about the loan and executing it, Standley was
in Missouri, Fisher was in California, and Bombola was in
either Nevada or California, though Bombola met with Standley
a few times in Missouri. (R. 1250-2 at 14, 19, 41-42, 108-11;
R. 1250-1 at 43-44; R. 1250 at 4.) Standley Plastics is a
Missouri corporation with its principal place of business in
that state. (R. 1243 at ¶ 3.) First Farmers was a
Florida limited liability company with its principal place of
business in Orlando. (R. 1145-1, Ex. B, at l.) Finally, the
lawyer who drafted the loan documents-William Huseman-is a
Florida attorney. (R. 1250 at 5; R. 1260 at 3.)
promissory note "established a maturity date of February
27, 2014 ... for the loan." (R. 1243 at ¶ 18.) By
that date, Standley Plastics owed a flat fee interest payment
of $250, 000 along with the principal of the loan.
(Id.; R. 1145, Ex. A at ¶¶ 1-3.) The
promissory note also imposed a late fee of $100, 000 per
month. (R. 1145, Ex. A at ¶¶ 3, 7.) Through the
guaranty agreement, Standley, in his individual capacity,
"guaranteed payment to First Farmers of all of the
'Obligations' of Standley Plastics to First Farmers
under the [promissory note]." (Id. at ¶
19.) In the security agreement, Standley Plastics granted
First Farmers a security interest in 7, 000, 000 shares of
Standley Plastic's common stock, all accounts receivable,
furniture, equipment, inventory, personal property, as well
as other assets. (R. 1058-1 at 3.) While the security and
guaranty agreements both contain choice-of-law clauses
indicating Florida law governs the two agreements,
(id. at 8; R. 1145, Ex. B at ¶ 18), the
promissory note contains no such provision.
Standley executed the loan documents, First Farmers made two
additional wire transfers from a Florida account to Standley
Plastics' bank account in Missouri, totaling the
remaining $1, 375, 000 of the $2, 000, 000 loan. (R. 1243 at
¶ 17; R. 1250 at 5; R. 1260 at 3.) Standley Plastics
used the money "to buy more equipment for use in [its]
Lamar, Missouri plant, and also used the additional funds to
generate more revenue." (R. 1243 at ¶ 17.) Neither
Standley nor Standley plastics have made any payments to
First Farmers. (Id. at ¶¶ 20-21.)
November 12, 2015, the Overall Receiver filed suit against
Defendants, alleging breach of the promissory note
("Count One") and breach of the guaranty agreement
("Count Two"). (R. 659-1, Compl.). On July 19,
2016, the Overall Receiver filed a motion for leave to file a
first amended complaint, (R. 1133), which the Court granted,
(R. 1141). In the First Amended Complaint, in addition to the
two breach of contract claims from the original complaint
(Counts One and Two), the Overall Receiver alleged Fraud in
the Inducement ("Count Three") and Unjust
Enrichment ("Count Four"). (R. 1145.)
filed the current motion as well as a motion to dismiss
Counts Three and Four. (R. 1171, 1174.) On October 13, 2016,
the Court denied Defendants' motion to dismiss. (R.
1265.) The Court now grants in part and denies in part
Defendants' motion for a determination of choice of law.
asserting diversity jurisdiction over state law claims,
federal courts "apply the forum state's choice of
law rules to select the applicable state substantive
law." McCoy v. IberdrolaRenewables, Inc., 760
F.3d 674, 684 (7th Cir. 2014); see Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Cooke v.
Jackson Nat'lIns. Co., No. 15 C 817, 2016 WL
1070829, at *3 (N.D. 111. Mar. 15, 2016). When applying state
law, the task of a federal court is to apply the law as
interpreted by the state's highest court, or, where the
state's highest court has not addressed a particular
issue, to "predict what [that] court will do."
Reiser v. Residential Funding Corp., 380 F.3d 1027,
1029 (7th Cir. 2004); see also EdwardE. Gillen Co. v.
Ins. Co. of the State of Pa., 825 F.3d 816, 818 (7th
choice-of-law analysis is necessary only if the party seeking
a choice-of-law determination carries its burden of
demonstrating a conflict between the laws of the different
jurisdictions in question. See Bridgeview Health Care
Ctr., Ltd. v. State Farm Fire & Cas. Co., 10 N.E.3d
902, 905 (111. 2014); see also Spitz v. Proven Winners N.
Am., LLC, 759 F.3d 724, 729 (7th Cir. 2014). Here, the
parties do not dispute that the application of Florida law
would make a difference in this case. Where, as here, a choice of
law determination is necessary, Illinois courts look to the
Restatement (Second) of Conflict of Laws. See Morris B.
Chapman & Assocs., Ltd. v. Kitzman, 739 N.E. 1263,
1269 (111. 2000); Bankers Life & Cas. Co. v.
Miller, No. 14 CV 3165, 2015 WL 515965, at *2 (N.D. 111.
Feb. 6, 2015); see also Barbara's Sales, Inc. v.
Intel Corp., 879N.E.2d 910, 919 (111. 2007); State
FarmMut. Auto Ins. Co. v. Burke, 51 N.E.3d 1082, 1097
(111. App. Ct. 2016).
question of which state's law applies is one for the
judge and may involve factual disputes "that the
district court must. . . resolve." See Nautilus Ins.
Co. v. Reuter, 537 F.3d 733, 742 (7th Cir. 2008);
Townsendv. Sears, Roebuck & Co., 879 N.E.2d 893,
898 (111. 2007); Curtis v. TransCorAm., LLC, 877
F.Supp.2d 578, 585-86 (N.D. 111. 2012). In that way,
determining the applicable law is similar to the analysis
courts undertake when answering jurisdictional questions.
See Nautilus, 537 F.3d at 743.
have two arguments supporting their contention that Florida
law governs the promissory note. First, Defendants assert
that the place of payment specified in the contract-
Florida-"controls which state's laws apply in the
absence of an express contract provision." (R.1175, Mem.
Supp. Defs.' Mot., at 4; R. 1260 at 2-5.) Second,
Defendants argue that because the promissory note, the
guaranty agreement, and the security agreement are all part
of the same transaction, and because the security agreement
and the guaranty contain a choice-of-law clause specifying
that Florida law should control, Florida law governs the
promissory note. The Court addresses these arguments in turn.